Spooked by the prospect of hostile bids, the old shoguns of business are increasingly adopting the creeping acquisition route to build up their stakes in companies they control.

The creeping acquisition mode permits promoters of companies to mop up 5 per cent of the equity capital every year from the market to strengthen their hold on their companies and ward off threats from a growing band of carpetbaggers intent on mounting takeover raids.

Marketmen reveal that the Tatas, Raymonds and the Thapars have been consolidating their holdings at a time when the share prices of their group companies have plumbed historic lows on the bourses.

Using the downturn in the capital markets as an opportunity to consolidate its stake in core group companies, the Tata group has been scooping up shares from the market in order to attain the 26 per cent threshold — widely regarded as the first rung of safety to thwart corporate marauders.

The Tatas, one may recall, had fixed a comfort level of 26 per cent stake in all their core group companies.

Confirming this, N A Soonawala, non-executive vice-chairman of the Tata group, said; “The Tata group is very close to reaching 26 per cent in all its core group companies”. Speaking to The Telegraph, Soonawala said the Tata group has over the years used the creeping acquisition to consolidate holdings. Asked if the comfort threshold would be raised above 26 per cent, Soonawala, who is also vice-chairman of Tata Sons, said the decision would have to be taken by the Tata Sons board. He also clarified that the group was not buying shares in companies where its holding company had more than 26 per cent.

Recently rumours in the marketplace suggested that the Tatas have been buying equity in Tata Chemicals, Tata Tea and Indian Hotels. The Tatas have in excess of 30 per cent equity holding in the three companies. Soonawala’s statement effectively scotches these rumours.

“We have been buying to consolidate our holding through the creeping acquisition route in Tata companies where our stake is below 26 per cent,” he clarified.

The holding companies of the Tatas, led primarily by Tata Sons, see the market downtrend as a window of opportunity at a time when the equities of core companies have sunk to their historic lows.

An analyst affiliated to a leading FII brokerage here said whenever a hostile bid was launched, the promoters of companies having a significantly lower stake tried to mop up their company shares from the market place.

Marketmen also aver that promoters of asset-rich and cash-rich companies like the Thapar group’s Crompton Greaves and Vijaypat Singhania’s Raymonds are consolidating their holdings. Promoters now can even consolidate holding through buyback, the analyst said.

The consolidation allows them to average the opportunity the high-priced acquisitions made earlier in group companies through the preferential route, and at the same time shore up their holdings in Tata companies.

Market circles aver that holding companies of Tatas were seen buying small parcels of Tata Steel and Tata Engineering shares .

For the previous fiscal ending march 2000, the Tata group had managed to ramp up its shareholding in three of its core group companies — Telco, Tisco and the three Tata Electric Companies (TEC) by almost 5 per cent during the fiscal year 1999-2000 to bring its holdings close to 26 per cent.

In Telco, the group’s holding has increased to around 22.67 per cent from 17.7 per cent in the previous fiscal, while in Tisco the Tata group’s shareholding is close to 24.24 per cent.

FRESH DEADLINE SET FOR DUNLOP REVIVAL SCHEME

OUR BUREAUX

Nov 8:

The Board for Industrial and Financial Reconstruction (BIFR) today came down heavily on both the management of Dunlop India Ltd as well as secured creditors for not reaching a consensus on the draft restructuring scheme (DRS) drawn up by the IDBI. It has given them eight weeks’ time to revise the scheme.

The board has also said that it could consider a change of management if the warring parties fail to reach some kind of a consensus.

The BIFR today granted a week’s time to both the company as well as its secured creditors for their suggestions and objections on the existing DRS. While three weeks have been given to revise the existing scheme, four
more weeks time have been granted for joint meetings between the management, creditors and the operating agency for finalising the DRS.

If the management and the creditors are able to reach a consensus in that time, the BIFR will circulate the scheme without any further hearings. However, in the absence of a consensus, stringent action including change of management could be considered.

Both the State Bank of India (SBI) and the United Bank of India (UBI) raised objections against the Rs 100 crore package submitted by IDBI.

The banks, led by the United Bank of India, demanded that the management bring back the money it had diverted. The BIFR directed that this should be handled separately under Section 24 of the Sick Industries and Companies Act (Sica).

The IDBI scheme suggested selling off Dunlop India’s uncharged assets, the proceeds from which would be used to clear the accumulated debt as well as meet the increased working capital requirement.

Dunlop India had cited working capital inadequacy as its prime constraint, which is making it difficult for the company to maintain the monthly average production. The company said it is unable to maintain even the bare minimum production level that would provide for funds to pay salary and wages and maintain infrastructure.

Meanwhile, a team of Japanese tyre major, Sumitomo Rubber Industries, visited the Ambattur factory of Dunlop in Tamil Nadu for technical purposes.

The team is also expected to visit the Sahagunj plant in West Bengal either in the last week of November or the first week of December.

PATENT OFFICES IN REVAMP MODE

FROM OUR CORRESPONDENT

New Delhi, Nov 8:

The government will spend Rs 75 crore to modernise patent offices to deal with the anticipated rush of applications made under the Patent Cooperation Treaty (PCT) of the World Intellectual Property Organisation (WIPO). Addressing a CII-WIPO meeting here today, the minister of state for commerce and industry, Raman Singh, said the PCT route was emerging a simple and economical way for companies and individuals to seek protection of their inventions. India has been designated in more than 84,000 patent applications world wide since it signed the Patent Cooperation Treaty in December 1998. In the 22 months since the sign-up, more than 180 Indian inventors have used the PCT to secure patent protection in over 100 contracting countries.

Gary Smith, director in PCT’s Geneva-based office, said intellectual property is now the driving force of the knowledge-based economy. Ever since internal applications began to be filed in 1978, 108 countries have been contracted. Over 5 lakh international applications were received by the WIPO till February this year. There are indications that more countries will sign the PCT in the near future, Smith said.

BASF PICK UP 51% IN USHPA POLYMERS

OUR BUREAUX

Nov 8:

The $ 29.5 billion chemicals giant BASF AG has acquired a 51 per cent stake in Pushpa Polymers Pvt Limited (PPPL), a company owned by the New York-based The Chatterjee Group (TCG).

Pushpa Polymers, which has 60,000 tonnes polystyrene capacity, went on stream earlier this year. However, the Rs 200-crore project at Dahej in Gujarat had been closed for the last two months.

Reasons for the closure
was not known and BASF officials were not willing to comment.

While BASF officials were not forthcoming on the details of investment, The Chatterjee Group also remained tight-lipped on the deal.

Polystyrene is widely used in packaging and disposable
products, households appliances and consumer electronics
goods.

This alliance will help BASF to fulfil its long-cherished ambition to set up a polystyrene manufacturing facility in the country.

A press statement issued by BASF said by virtue of this acquisition BASF will be the first global polystyrene manufacturer operating in India.

“We will build up a strong and profitable position in one of the most important growth markets for polystyrene in Asia,” Werner Pratorius, head of BASF’s styrenic polymers division said.

The Chatterjee Group CEO, Purnendu Chatterjee said “We are pleased to have a partner like BASF joining our petrochemical development initiatives and look forward to a long and productive partnership on this and other projects within India.”

BASF has a capacity of 1.5 million tonnes of polystyrene per year with plants in Europe, north and Latin America and Asia.

SAMSUNG PLANS MONITOR UNIT

FROM OUR CORRESPONDENT

New Delhi, Nov 8:

Samsung India Electronics Ltd will set up a high-tech state-of-the-art colour monitor plant in India at an initial investment of $ 10 million.

However, the investment in the plant will be spread over two phases. While the initial investment will be to the tune of $ 10 million, the Indian arm of the Korean electronic major will invest another $ 25 million by the year 2005.

In the first phase, the plant will have a capacity of one million units and will cater to the domestic market. The capacity will be enhanced to four million units through fresh investments in the second phase by 2005.

The company has set a target of producing six lakh units by the year-end and one million units by the end of 2001. Samsung plans to increase its present 45 per cent market share to 50 per cent by next year.

The company also said it was contemplating a move to enter new markets.

Announcing the company’s decision to set up its seventh computer monitor manufacturing facility, Jong Yong Yun, vice-chairman and chief executive officer Samsung Electronics said, “India will be
one of the major investment destinations in the region.”

He added, “Samsung’s vision for India includes gaining a firm foothold in the Indian consumer electronics and infotech industry. We want to expand our operations here and plan to venture into new products and businesses, apart from the ones we are currently involved in the country.”

While Yun declined to elaborate on the new areas the company was contemplating a foray into, company sources identified the insurance and the services sector like resorts as likely ones.

Sources added that Samsung already has interests in the insurance and capital market sector.

It several insurance subsidiaries in Korea which cater to various types of insurance products such as Samsung Life Insurance and Samsung Fire & Marine Insurance. The latter is a non-life insurance company dealing with property and casualty insurance, automobile insurance, marine and aviation insurance, besides other speciality areas.

FROM STUMP POLITICS TO BUSINESS-SPEAK

BY A STAFF REPORTER

Calcutta, Nov 8:

Dollops of nostalgia, a dash of pragmatism and a twist of intrigue marked a meeting called by the city’s business leaders to felicitate Jyoti Basu and his newly crowned successor, Buddhadeb Bhattacharjee. But lurking beneath the camaraderie were whispers about why a prominent chamber had chosen to stay away from an occasion that was as much about building bridges as stealing the limelight.

After the rah-rah sendoff by flag-waving and petal-showering crowds who lined the streets on Monday, it was the turn of businessmen to do much the same amid the clink of crystal in the cool and elegant Taj Bengal this evening.

When the country’s best-known political patriarch took the podium with his well-versed successor, Basu glided across issues, delved into topics that were once political minefields, and hardly left any of Bengal’s proverbial hot buttons untouched.

For a man who spent much of his 8,540 days in office, first steering, and then calming truculent unions, Basu held the managements more responsible for industrial sickness than the labour movement, which, he said, could be blamed in only 2 to 3 per cent of the cases.

Then, there were some home truths — the times have changed, and so must Bengal’s brand of trade union assertiveness. “We coined the word, gherao, in the 1950s. It is now almost an English word. But, I have no hesitation in saying that gheraos of all kinds are illegal and unethical,” said the man, who his critics say struggled to keep up with the times.

Basu blamed many problems that plague the state on the Centre’s step-motherly attitude, its licence raj and freight equalisation policies. But, he promised a brighter tomorrow, holding out Haldia Petrochemicals as an enduring new symbol of Bengal’s new tryst with industrial renaissance.

For Bhattacharjee, who was presented by Basu as a man the industry could trust for his abilities as an administrator and a business-promoter, there was little left tospeak.All the same, it did clear doubts about a smooth transition at the Writers’.The new man who started his first day in the hot seat by clearing land allotments for Wipro — a move many say his political rivals will use as cannon fodder in poll-bound Bengal — made it clear that private capital and initiatives are welcome. “Ours is an investor-friendly state and you can help us immensely,” he told a congregation of the industrialists.

And now for the suspense that surrounded the absence of Bengal Chamber of Commerce and Industry (BCCI). The Indian Chamber of Commerce and Industry (ICC) — one of the chambers which organised the meeting — said the BCCI president and vice-president were out of town. They were informed about the event only two days back and, therefore, could not call off prior engagements, ICC secretary general Nazeeb Arif said. Sources say Bengal Chamber plans to felicitate Basu separately.